Become a millionaire by busting these 5 myths

Warren Buffett goofs off with Cleveland Cavaliers mascot Moon Dog before a game in 2014.

By

JaimeTardy

Many people believe that — while it’d certainly be nice — they’ll never become millionaires. That it’s an utterly unattainable dream.

The truth is: Hitting the $1 million mark is more attainable today than ever — and more important. That’s because, to live comfortably in retirement through your 80s, many people will need a nest egg of at least $1 million. “A general rule of thumb is that you need to save $1 million for every $40,000 of annual income you need to replace at retirement, not including Social Security, pension income or any other retirement income,” says David Fernandez, CFP, of Wealth Engineering in Scottsdale, Ariz.

Fortunately, there are a lot of ways to do it. While doing research for my book, “The Eventual Millionaire,” I interviewed more than 100 millionaires who came from all walks of life and made their first million in dozens of different ways, from starting their own businesses to investing in the stock market or real estate. And those aren’t the only paths to becoming a millionaire, either: Others hit the mark by simply living below their means and saving portions of each paycheck.

Before you can make a million, though, you need to get past the mystique and the myths surrounding it. Here are 6 common myths about millionaires debunked.

The myth: millionaires are smarter

People tend to put millionaires on a pedestal: They must be better or smarter than everyone else to achieve that goal. But that general statement simply isn’t true. Millionaires are ordinary people who have achieved extraordinary goals, but they make mistakes like everyone else. They may misspell words; they may even have learning disabilities. They’ve likely been in debt and had to dig themselves out. They’ve had ideas and businesses fail. Most of the ones I interviewed for my book have worked their way up the ladder, learning and stumbling along the way.

Rather than having lots of book smarts, what most millionaires have is a knack for setting goals for themselves and working toward them — without letting excuses get in their way. They, too, have to deal with unexpected expenses — plumbing leaks, health insurance increases, car trouble. They just keep moving forward despite the inevitable obstacles they have to overcome.

The myth: millionaires are just luckier

Millionaires are the luckiest among us, right? They won the lottery, struck gold with their very first attempt at launching a business or haphazardly landed their dream jobs with massive salaries. Not so: Pure luck is not a factor in achieving success. Rather, truly successful people make their own luck. After all, a million-dollar idea is worth nothing without execution.

Bobby Casey, founder of asset protection firm Global Wealth Protection, told me the story of starting his first business building bikes for stores like Wal-Mart
WMT, -1.01%
—a company that would eventually earn more than $6 million. “I went to at least 60 stores before I finally found one that said, ‘OK, we’ll hire you. How much do you charge?’”

Casey had no money at the time — actually a “negative net worth,” as he describes it. “I racked up a bunch of credit card debt…driving around for several weeks at a time, only hearing no, no, no, no.” I asked him what he thinks might have happened if he stopped before he hit that 60th store. His response? “I wouldn’t have stopped if it took me 300 stores.”

Casey would say it was hard work, not luck, that got him over the million-dollar threshold. After getting an “in” at that first store, he worked 12-hour shifts — sometimes several in a row, at various stores, without stopping to sleep in between — to assemble thousands of bicycles for the Christmas season. Assembling bikes for Wal-Mart turned into assembling grills and lawn equipment at Home Depot
HD, -0.24%
and Lowe’s
LOW, -0.99%
and pool tables and other sporting goods equipment for Dick’s Sporting Goods and other chain stores. After 12 years, Casey sold his assembly and installation company in 2008.

The myth: millionaires live lavishly

When you think of millionaires, you may picture people living in luxurious mansions and driving expensive sports cars. The reality? Millionaires are often the people next door: They drive Hondas and Volvos. They’re frugal (57% of the ones I interviewed described themselves as such). They often spend their money on necessities and a few things that are very important to them. Think Warren Buffett: The celebrated multibillionaire famously still lives in the Omaha, Nebraska house he bought in 1958 for $31,500.

In most cases, millionaires have gotten to where they are precisely because they’ve practiced excellent savings habits and live frugally. They learn to make smart choices, and they don’t stop just because they hit the $1 million mark. If anything, they’re validated by seeing the choices they’ve made paid off.

The myth: most millionaires were born into money

Another common myth is that millionaires were born into money or inherited it. But that’s not often the case. In a recent survey, Fidelity Investments found 86% of millionaires are self-made. And among the more than 100 millionaires I interviewed for my book, each was self-made and only 26 % of them said they even had connections to important people beforehand.

Take Dani Johnson. The speaker, best-selling author of “First Steps to Wealth” and “Grooming the Next Generation for Success” and producer of highly popular success seminars, started at the very bottom. After growing up on welfare and living with abuse throughout her childhood, Johnson ended up pregnant and single at 17. After a brief marriage at age 21, Johnson was left homeless and in debt. But she wanted to make a better life for herself.

She’d been introduced to a multilevel marketing business a couple of years earlier and decided it could be a chance to change her situation. After attending a panel session in which four millionaires talked about how they’d built their incomes through the business, Johnson decided it was worth a try. “I was told my whole life up to that point that I was nothing but a failure and I could never do anything right. I just sat there and thought to myself, ‘Man, if I’m the dumbest person in the room and it takes me 20 years to figure this out and to learn how to do what they do, and if I fail their income by 90 %, then I would still do better in business for myself than I ever would staying at my job that I had at the mall.’”

For Johnson, the key to success wasn’t being born into money; it was being willing to give herself a chance. She started her first business from the trunk of her car and a pay phone booth, and in her first four days, managed to sell $4,000 in products, generating $2,000 in profit for herself. The next month, while still working part time as a cocktail waitress, she made $6,500 and her income “just continued to skyrocket from there,” she says. Today, she teaches others how to build success, no matter where they start out.

The myth: millionaires have to be fearless

Though it might seem like the only way to become a millionaire is to forge full-steam ahead and assume a lot of risk, fears are totally normal — even for the ultrasuccessful. Fifty-seven percent of the millionaires I surveyed said they were scared before starting their own business — scared of failure, disappointing their spouses or their families, scared of losing everything.

Anita Crook, founder of Pouchee, a purse organizer showcased on “The Today Show,” Fox Business and other media, started her company without any prior business experience. “Anybody who knows me knows I am not a salesperson,” Crook says. “I was scared to death to go into my first store to try to sell them something, especially something I had produced. I don’t take rejection well, so I was really afraid I was going to run out of the store crying if they had not liked it.” But Crook knew she had to try — it was the only way to sell her product. Once she heard “yes” from a few stores, she built the confidence to keep moving forward.

Success requires some risk, but wise millionaires don’t want to take uncalculated gambles. Millionaires have learned how to examine an opportunity and analyze the risk. They will even do small tests beforehand to see if an idea will work before going all in. They prefer to know as much information as they can ahead of time so they don’t make a bad investment.

Most millionaires find a happy medium between optimism and pessimism; they figure out how to examine opportunities realistically. They acknowledge amazing potential, but work tirelessly to learn and predict beforehand to make sure their investments pay off.

The myth: they earn million-dollar paychecks

It’s true that many millionaires have earned their money by starting (or selling) their own businesses or finding high-paying positions within organizations. But this certainly isn’t the only way to amass $1 million. In his book “Millionaire Teacher,” Andrew Hallam explains how he saved over $1 million as a teacher well before retirement age, outlining how he used low-cost index funds and a disciplined approach to saving, investing and living on a budget to build a nest egg most of his fellow teachers would envy.

In addition to investing in the stock market, like Hallam, other millionaires boost their bottom lines by adding second jobs or passive streams of income. For instance, investing in real estate can allow a middle-income wage-earner to develop rental income as a second, reliable income stream. Artists who pay the bills and invest with the income earned through a day job might sell paintings for hundreds or thousands of dollars on the side and bank the extra income. Those who don’t earn million-dollar paychecks can still reach the $1 million mark; it just requires discipline, creativity and focus on the goal.

Mortgage Rates

Powered by

This advertisement is provided by Bankrate, which compiles rate data from more than 4,800 financial institutions. Bankrate is paid by financial institutions whenever users click on display advertisements or on rate table listings enhanced with features like logos, navigation links, and toll free numbers. Dow Jones receives a share of these revenues when users click on a paid placement.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.